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ABI: Signs of NFC Payment System Convergence

ABI Research's annual assessment of near field communication (NFC) reader vendors found increasing support for multiple payment systems, which could help adoption. ViVOtech, Cubic Transportation Systems and On Track Innovations (OTI) topped the vendor rating.
Aug 26, 2008This article was originally published by RFID Update.

August 26, 2008—There is increasing support for the convergence of contactless payment systems for transport ticketing with broader, open programs promoted by Visa and MasterCard, according to a new analysis of near field communication (NFC) RFID readers conducted by the London office of ABI Research. ABI is an international market research firm that produces an annual matrix that maps the capabilities of NFC reader offerings.

"What was notable in this year's matrix was the coming together of transportation and contactless payment reader capabilities," ABI Research analyst Jonathan Collins told RFID Update by email from the UK. "Open payments are set to make their way into the transportation ticketing market and transportation ticketing specialists are working to support that switch."

To compile the matrix, which was announced last week, ABI rates vendors based on the breadth and innovation of their product offerings, industry leadership, partnerships, customer base and other factors. Contactless RFID reader maker ViVOtech earned the top overall ranking, followed by Cubic Transportation Systems and On Track Innovations (OTI).

"What this Vendor Matrix shows is that the dedicated contactless payment vendors such as ViVOtech and OTI, and those that built their contactless offerings around transportation deployments, such as Cubic and ASK, are increasingly converging as transportation systems move toward adoption of open contactless payments," Collins said in ABI's announcement. "The two markets are merging, and the vendors in this space will increasingly be required to offer products, services, and support across a range of contactless payment and ticketing applications."

Contactless transportation ticketing programs have typically been closed systems, but the contactless payment programs led by MasterCard (PayPass) and Visa (payWave) have been open and intended to attract a broad range of participating merchants and service providers. Interoperability among programs could spur consumer demand and lead more merchants to accept contactless payments -- addressing two barriers that have hampered NFC adoption.

"The contactless payment market is set to go through strong growth over the next five years both in the US and around the world," Collins told RFID Update. "The coming together of contactless payments systems like Visa payWave and MasterCard PayPass with contactless transportation ticketing holds the promise of further fuelling contactless uptake. What is clear is that reader vendors are lining up to support that transition."

The lack of a supporting infrastructure to accept NFC payments was the top barrier to adoption identified by Venture Development in a report issued earlier this year (see VDC: NFC Adoption Will Be Slower Than Expected).

In January ABI Research predicted 6.5 million NFC devices would ship this year, a 33.5 percent increase from 2007. ABI characterized hurdles to NFC adoption as near- and medium-term, and believes the technology will ultimately be widely deployed (see NFC Projections Revised Down (Again)). In another study, Juniper Research, which tracks the NFC industry by transaction value, also recently said near-term NFC adoption would be slow, with the expectation of strong annual growth beginning in 2011 (see NFC RFID to Power $75+ Billion in Transactions in 2013).
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